Pakistan has paid around $16 billion in interest on its external debt over the past four years, averaging about $4 billion annually, State Bank of Pakistan (SBP) Governor Jameel Ahmed has said.
Speaking at a post-monetary policy press conference on Monday, Ahmed said Pakistan’s external debt currently stands at around $107 billion, compared with more than $100 billion in 2022.
He said the country’s external debt would have reached around $116 billion today if Pakistan had not borrowed during this period but had still incurred the interest payments.
Pakistan Pays Interest Without Taking Fresh Loans
Ahmed said Pakistan paid around $10 billion to $11 billion of its interest bill using dollars purchased by the SBP from the foreign exchange market rather than fresh borrowing.
The central bank purchased more than $30 billion from the market during the period, helping increase foreign exchange reserves from around $3 billion in early 2023, when they covered roughly two weeks of imports, to approximately $21.5 billion.
Ahmed said Pakistan’s external debt had increased by only $5 billion to $6 billion over the past four years, equivalent to roughly $1 billion to $1.25 billion annually. By comparison, external debt grew by around $6.5 billion annually between 2015 and 2022.
Interest Payments Expected to Fall Below $3 Billion
The governor said the composition of Pakistan’s external debt had improved, with multilateral and bilateral lenders, including the World Bank and Asian Development Bank, accounting for around 80 percent of the total, compared with 55 percent in early 2023.
He expects annual interest payments on external debt to fall below $3 billion next year.
Ahmed also said the SBP aims to increase foreign exchange reserves to $23 billion by December 2026 and $25 billion by June 2027.
His remarks came after the central bank raised its policy rate by 50 basis points to 12 percent, citing inflationary pressures and risks to the economic outlook.
